The Paris-based OECD is particularly bad on fiscal policy and it is infamous for its efforts to prop up Europe’s welfare states by hindering tax competition.

It even has a relatively new “BEPS” project that is explicitly designed so that politicians can grab more money from corporations.

So it’s safe to say that the OECD is not a hotbed of libertarian thought on tax policy, much less a supporter of pro-growth business taxation.

Which makes it all the more significant that it just announced that supporters of free markets are correct about the Laffer Curve and corporate tax rates.

The OECD doesn’t openly acknowledge that this is the case, of course, but let’s look at key passages from a Tuesday press release.

Taxes paid by companies remain a key source of government revenues, especially in developing countries, despite the worldwide trend of falling corporate tax rates over the past two decades… In 2016, corporate tax revenues accounted for 13.3% of total tax revenues on average across the 88 jurisdictions for which data is available. This figure has increased from 12% in 2000. …OECD analysis shows that a clear trend of falling statutory corporate tax rates – the headline rate faced by companies – over the last two decades. The database shows that the average combined (central and sub-central government) statutory tax rate fell from 28.6% in 2000 to 21.4% in 2018.

So tax rates have dramatically fallen but tax revenue has actually increased. I guess many of the self-styled experts are wrong on the Laffer Curve.

Let’s take a more detailed look at the data. Here’s a chart from the OECD showing how corporate rates have dropped just since 2000. Pay special attention to the orange line, which shows the rate for developed nations.

And the chart only tells part of the story. The average corporate rate for OECD nations was 48 percent back in 1980.

In other words, tax rates have fallen by 50 percent in the developed world.

Yet if you look at this chart, which I prepared using the OECD’s own data, it shows that revenues actually have a slight upward trend.

I’ll close with a caveat. The Laffer Curve is very important when looking at corporate taxation, but that doesn’t mean it has an equally powerful impact when looking at other taxes.

It all depends on how sensitive various taxpayers are to changes in tax rates.

Business taxes have a big effect because companies can easily choose where to invest and how much to invest.

The Laffer Curve also is very important when looking at proposals (such as the nutty idea from Alexandria Ocasio-Cortez) to increase tax rates on the rich. That’s because upper-income taxpayers have a lot of control over the timing, level, and composition of business and investment income.

But changes in tax rates on middle-income earners are less likely to have a big effect because most of us get a huge chunk of our compensation from wages and salaries. Similarly, changes in sales taxes and value-added taxes are unlikely to have big effects.

Increasing those taxes is still a bad idea, of course. I’m simply making the point that not all tax increases are equally destructive (and not all tax cuts generate equal amounts of additional growth).

The bad news is that Democrats in the House of Representatives already are pushing for a big increase in the corporate rate.

Rep. John Yarmuth, the new House Budget chairman, said his chamber’s budget blueprint will aim to claw back lost revenue by boosting the corporate tax rate from its current 21 percent to as high as 28 percent… he anticipates the budget resolution will envision changes to the 2017 GOP tax overhaul, including raising the corporate tax rate above its current 21 percent. “…We’ll see how much revenue we can get out of it.” The rate was 35 percent before it was cut in the GOP tax bill.

Since Republicans control the Senate and Trump is in the White House, there’s probably no short-term risk of a higher corporate tax rate.

But such an initiative could be a major threat after the 2020 election, so let’s augment our collection of evidence showing why a higher rate would be a very bad idea.

We’ll start with some analysis from the number crunchers at the Tax Foundation.

A corporate tax rate that is more in line with our competitors reduces the incentives for firms to realize their profits in lower-tax jurisdictions and encourages companies to invest in the United States. Raising the corporate income tax rate would dismantle the most significant pro-growth provision in the Tax Cuts and Jobs Act, and carry significant economic consequences. …Raising the corporate income tax rate would reduce economic growth, and lead to a smaller capital stock, lower wage growth, and reduced employment. …Raising the rate to 25 percent would reduce GDP by more than $220 billion and result in 175,700 fewer jobs.

Here’s the table showing the negative effect of a 22 percent rate and a 25 percent rate, so a bit of extrapolation will give you an idea of how the economy will suffer with a 28 percent rate.

By the way, since the adverse impact on wages is one of the main reasons to be against a higher corporate tax rate, I’ll also share this helpful flowchart from the article.

Now let’s look at some research from China, which underscores the importance of low rates if we want more innovation.

Here’s the unique set of data that created an opportunity for the research.

In November 2001, China implemented a tax collection reform on all manufacturing firms established on or after January 2002, which switched the collection of corporate income taxes from the local tax bureau to the state tax bureau. After the reform, similar firms established before or after 2002 could pay very different effective tax rates because of the differences in the management and incentives of those two types of tax bureaus…, resulting in a reduction of effective corporate income tax rates by almost 10% among newly established firms. …the policy change created exogenous variations in the effective tax rate among similar firms established before versus after 2002. We can thus apply a regression discontinuity design (RD) and use the generated variation in the effective tax rate to identify the impact of taxes on firm innovation.

And here are the findings.

Our analysis yields several interesting results. First, we show a strong and robust causal relationship between tax rate and firm innovation. Decreasing the effective tax rate by one standard deviation (0.01) increases the average number of patent application by a significant 5.7% (see Figure 2 for the graphical evidence). The reform also stimulated R&D expenditures and increased the skilled-labour ratio by 14%. Second, a lower tax rate also improves the quality of patents. The impact of tax reform on patent applications mainly comes from its effect on invention and utility patents – decreasing the effective tax rate by one standard deviation improves the probability of having an invention patent application by 4.4% and increases the number of utility patent applications by 4.7%.

Here’s a chart from the study, showing the difference in patents between higher-taxed firms and lower-taxed firms.

Last but not least, let’s review some of the findings from a study published by the National Bureau of Economic Research.

We present new data on effective corporate income tax rates in 85 countries in 2004. …In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. For example, a 10 percent increase in the effective corporate tax rate reduces aggregate investment to GDP ratio by 2 percentage points. Corporate tax rates are also negatively correlated with growth, and positively correlated with the size of the informal economy. The results are robust to the inclusion of controls for other tax rates, quality of tax administration, security of property rights, level of economic development, regulation, inflation, and openness to trade

Yes, he’s still lovable ol’ Crazy Bernie, but he’s now being overshadowed by Congresswoman Alexandria Ocasio-Cortez, another out-of-the-closet socialist who somehow thinks America should be more like Greece or Venezuela.

Brian Riedl of the Manhattan Institute opines in National Review about AOC’s proposed tax hike on the rich. He starts with a very appropriate economic observation.

A 70 percent tax bracket would raise very little (if any) revenue, while damaging the economy and sending income and jobs overseas.

He then points out that we should look at both sides of the fiscal ledger.

And the spending side of the left’s ledger is very crowded and very heavy.

…when assessing the needed tax revenues, a green-energy initiative costing $7–$10 trillion over the decade should be examined in the context of$42 trillion in additional Democratic-socialist proposals that include single-payer health care ($32 trillion), a federal jobs guarantee ($6.8 trillion), student-loan forgiveness ($1.4 trillion), free public college ($800 billion), infrastructure ($1 trillion), family leave ($270 billion), and Social Security expansion ($188 billion). …These spending promises are so stratospheric as to be incomprehensible — except to the far Left, which clings to the myth that simply taxing millionaires can finance a level of socialism that would make the Swedes start a tea-party movement.

Here’s the key part of Brian’s column.

He points out that there’s no way to finance the agenda of Democratic Socialists with class-warfare taxes. Even if the AOC tax plan is dramatically expanded.

…a 100 percent tax rate on all income over $1 million…would raise 3.8 percent of GDP — not even enough to balance the current budget, much less finance a Green New Deal. And even that figure implausibly assumes that people continue working and investing. Slightly more realistically, doubling the top 35 percent and 37 percent tax brackets, to 70 percent and 74 percent for singles earning more than $200,000 and couples earning at least $400,000, would raise roughly 1.6 percent of GDP. That figure also ignores all revenues lost to the economic effects of 85 percent marginal tax rates (when including state and payroll taxes) as well as tax avoidance and evasion. …limiting the 70 percent tax bracket to incomes over $10 million…would raise only 0.25 percent of GDP — about $50 billion annually. …$50 billion is surely too high of an estimate, because the kind of people with incomes over $10 million also have teams of accountants and tax lawyers finding every conceivable tax loophole and overseas income shift.

But, as Brian noted, these taxes wouldn’t come close to financing the leftist wish list even if one makes absurd assumptions that behavior doesn’t change and the economy is unaffected.

So how do European nations finance their large welfare states?

Europe finances its generous welfare states through steep value-added taxes that hit the entire population. …Increasing federal spending by 21 percent of GDP to fund Democratic socialism — even after slashing defense — would require either a 55 percent payroll tax increase, or 115 percent value-added tax, according to CBO data. Acknowledging this brutal middle-class burden would immediately end any public flirtation with “free-lunch socialism.”

By the way, there one final point from Brian’s column that is worth sharing.

He explains that high tax rates in the 1950s, 1960s, and 1970s didn’t generate much revenue. Even from the rich.

A common liberal retort is that the economy survived 91 percent income-tax rates under President Eisenhower and 70 percent tax rates through the 1970s. That does not mean those policies raised much revenue. Tax exclusions and high income thresholds shielded nearly everyone from these tax rates — to the degree that the richest 1 percent of earners paid lower effective income-tax rates in the 1950s than today. In 1960, only eight taxpayers paid the 91 percent rate. Overall, today’s 8.2 percent of GDP in federal income-tax revenues exceeds that of the 1950s (7.2 percent), 1960s (7.6 percent), and 1970s (7.9 percent). Those earlier decades were not a tax-the-rich utopia.

The bottom line is that Alexandria Ocasio-Cortez’s economic agenda cannot be justified when looking at economic data, fiscal data, and historical data.

But we can say with great confidence that ordinary people ultimately will pay the heaviest price if her proposals get enacted since her class-warfare tax hikes will be a precursor for huge tax increases on the rest of us.

The Liberal government’s tax on Canada’s top 1 per cent failed to produce the promised billions in new revenue in its first year, as high-income earners actually paid $4.6-billion less in federal taxes. …The latest available tax records show that revenue from Canadians earning about $140,000 or more – which had previously been the fourth and highest tax bracket – dropped by $4.6-billion in 2016, the first full year that the Liberal tax changes were in effect. Further, 30,340 fewer Canadians reported incomes in that range for 2016 compared with the year before. …The new top bracket with a 33-per-cent tax rate was predicted to raise about $3-billion a year in new revenue… Critics of the Liberal plan say the CRA’s 2016 numbers justify their concern that a new top tax bracket hurts Canadian efforts to boost competitiveness and attract top talent.

It’s quite possible, as noted in the article, that some of the foregone revenue might be the result of one-time changes, such as upper-income taxpayers shifting income from 2016 to 2015 (rich people do have considerable control over the timing, level, and composition of their income).

A report from Global News reviews a report about the degree to which revenues dropped for transitory reasons.

The Liberal government’s 2016 tax hike on Canada’s top one per cent not only failed to yield the promised billions, but resulted in a net revenue loss for government coffers… After adjusting for economic changes and one-time factors, the paper estimates, based on 2016 tax data, that the Liberals’ new tax bracket for top earners creates $1.2 billion in new revenue for the federal government but a $1.3 billion loss for provincial governments. …Finance Minister Bill Morneau’s office, however, has maintained that the revenue drop for 2016 was a one-off event. …But an analysis of the data that adjusts for the impact of the dividends maneuver and economic factors still shows that the tax hike would have fallen far short of the hype… Studies have shown that top earners are more likely than lower-income taxpayers to react to tax increases by reducing their taxable income. This may be because the wealthy have access to more sophisticated tax advice, are more easily able to shift assets to lower-tax jurisdictions or can afford to simply decide to work less given that they get to keep less of their money.

Much of the data in this story came from an analysis by the C.D. Howe Institute.

Here’s the key chart from that study, which disentangles the one-off changes and permanent changes caused by the higher tax rate.

The bottom line is that the experts at the C.D. Howe Institute believe that the central government eventually will collect more revenue from the higher tax rate, but:

The added revenue for the central government is more than offset by lower tax receipts for subnational levels of government.

In other words, Trudeau’s tax hike was a big mistake. The only tangible results are that the private sector is now smaller and the country is less competitive.

For what it’s worth, I view the lack of additional tax revenue as a silver lining to an otherwise dark cloud. Maybe, just maybe, this will put a damper on some of Trudeau’s irresponsible plans for more spending.

She’s not quite as bad as Matt Yglesias, who wants a top tax rate of 90 percent (a rate that Crazy Bernie also likes), but Congresswoman Alexandria Ocasio-Cortez is not bashful about wanting to use the coercive power of government to take much larger shares of what others have earned.

And she doesn’t want to take “just” half, which would be bad enough. She wants to go ever further, endorsing a top tax rate on household income of 70 percent.

Those of you with a lot of gray hair may recall that’s the type of punitive tax regime we had in the 1970s (does anybody want a return to the economic misery we suffered during the Nixon and Carter years?).

Rep. Alexandria Ocasio-Cortez (D-N.Y.) is floating an income tax rate as high as 60 to 70 percent on the highest-earning Americans… Ocasio-Cortez said a dramatic increase in taxes could support her “Green New Deal” goal of eliminating the use of fossil fuels within 12 years… “There’s an element where yeah, people are going to have to start paying their fair share in taxes.” …When Cooper pointed out such a tax plan would be a “radical” move, Ocasio-Cortez embraced the label… “I think that it only has ever been radicals that have changed this country,” Ocasio-Cortez said. “Yeah, if that’s what radical means, call me a radical.”

There are many arguments to make against this type of class-warfare policy, but I’ll focus on two main points.

First, this approach isn’t practical, even from a left-wing perspective. Simply stated, upper-income taxpayers have considerable control over the timing, level, and composition of their income, and they can take very simple (and completely legal) steps to protect their money as tax rates increase.

This is one of the reasons why higher tax rates don’t translate into higher tax revenue.

If you don’t believe me, check out the IRS data on what happened in the 1980s when Reagan dropped the top tax rate from 70 percent to 28 percent. Revenues from those making more than $200,000 quintupled.

Ms. Ocasio-Cortez wants to run that experiment in reverse. That won’t end well (assuming, of course, that her goal is collecting more revenue, which may not be the case).

Second, higher tax rates on the rich will have negative consequences for the rest of us. This is because there is a lot of very rigorous research that tell us:

And I didn’t even include the potential costs of out-migration, which doubtlessly would be significant since Ms. Ocasio-Cortez would impose the developed world’s most punitive tax regime on the United States.

I’ll close by recycling this video on the harmful impact of punitive tax rates.

P.S. Today’s column focused on the adverse economic impact of a confiscatory tax rate, but let’s not forget the other side of the fiscal equation. Ms. Ocasio-Cortez wants to finance a “green new deal,” which presumably means a return to Solyndra-style scandals.

…some states are booming while others are suffering a European-style sclerosis of population loss and slow economic growth. …The eight fastest-growing states by population last year…also experienced rapid employment and GDP growth spurred by low tax rates and policies generally friendly to business and job creation. Nevada, Arizona, Texas, Washington, Utah, Florida and Colorado ranked among the eight states with the fastest job growth this past year, according to the Bureau of Labor Statistics. Nevada, Texas, Washington and Florida have no income tax. …Then there’s California. Despite its balmy weather and thriving tech industry, the Golden State last year lost more people to other states than it gained from foreign immigration. Since 2010, a net 710,000 people have left California for other states. …New York Gov. Andrew Cuomo recently blamed cold weather for the state’s population exodus, but last year frigid New Hampshire with no income tax attracted 3,900 newcomers from other states. …Illinois’s population has declined by 157,000 over the past five years… Cold weather? While Illinois’s population has declined by 0.8% since 2010, Indiana’s has grown 3.1% and Wisconsin’s by 2.2%.

Here’s my favorite part of the editorial.

America as a whole can thank the Founders for creating a federalist system that allows the economic and political safety valve of interstate policy competition.

Honeywell International Inc. is snubbing New Jersey and heading south. …Honeywell’s move follows other companies that have moved corporate offices out of states with elevated costs of living and high taxes, including General Electric Co.’s relocation of its headquarter to Boston from Connecticut. Those costs were exacerbated by a new law last year that removed state income-tax deductions on federal taxes. North Carolina has a lower state income tax than New Jersey for higher-paid employees.

Gov. Paul LePage said Monday that he plans to move to Florida for tax reasons… LePage and his wife, Ann, already own a house in Florida and often vacation there. He said he would be in Maine from April to September. Asked where he would maintain his legal residency, LePage replied Florida. …”I have a house in Florida. I will pay no income tax and the house in Florida’s property taxes are $2,000 less than we were paying in Boothbay. … At my age, why wouldn’t you conserve your resources and spend it on your family instead of on taxes?” …LePage often has cited Maine’s income tax – currently topping out at 7.15 percent, down from a high of 8.5 percent when he took office – as an impediment to economic growth and attracting/retaining residents.

Bryce Harper and Manny Machado…will “take home” significantly higher or lower pay depending on which teams sign them and the applicable income tax rates in the states where those teams are based. This impact could be worth tens of millions of dollars. …For example, assume the Cubs and Dodgers offer identical eight-year, $300 million contracts to Machado. Lozano would warn the Dodgers that their offer is decidedly inferior. As a Dodger, Machado’s million-dollar wages would be subject to the top bracket of California’s state income tax rate. At 13.3%, it is the highest rate in the land. In contrast, as a Cub, Machado would be subject to the comparatively modest 4.95% Illinois income tax rate. …the difference in after-tax value of these two $300 million contracts would be $14 million.

Though Lozano needs to warn Machado that the recent election results significantly increase the danger that Illinois politicians will finally achieve their long-held goal of changing the state constitution and replacing the flat tax with a class-warfare system.

Since we’re talking about the Land of Lincoln, it’s worth noting that the editors at the Chicago Tribuneunderstand the issue.

Every time a worker departs, the tax burden on those of us who remain grows. The release on Wednesday of new census data about Illinois was alarming: Not only has the flight of citizens continued for a fifth straight year, but the population loss is intensifying. This year’s estimated net reduction of 45,116 residents is the worst of these five losing years. …Residents fed up with the economic climate here are heading for less taxaholic, jobs-friendlier states. …Many of them left because they believed Illinois is headed in the wrong direction. Because Illinois politicians have raised taxes, milked employers and created enormous public indebtedness that the pols want to address with … still more taxation. …How bad does the Illinois Exodus have to get before its dominant politicians understand that their debt-be-damned, tax-and-spend policies are ravaging this state?

Wow, no wonder Illinois is perceived to be the first state to suffer a fiscal collapse.

Let’s now zoom out and consider some national implications.

Chris Edwards took a close look at the data and crunched some numbers.

The new Census data confirms that people are moving from tax-punishing places such as California, Connecticut, Illinois, New York, and New Jersey to tax-friendly places such as Florida, Idaho, Nevada, Tennessee, and South Carolina. In the chart, each blue dot is a state. The vertical axis shows the one-year Census net interstate migration figure as a percentage of 2017 state population. The horizontal axis shows state and local household taxes as a percentage of personal income in 2015. …On the right, most of the high-tax states have net out-migration. …On the left, nearly all the net in-migration states have tax loads of less than 8.5 percent. …The red line is fitted from a simple regression that was highly statistically significant.

Here’s the chart.

Professor Glenn Reynolds wrote a column on tax migration for USA Today.

He starts by warning states that it’s a very bad recipe to repel taxpayers and attract tax consumers.

IRS data show that taxpayers are migrating from high-tax states like New York, Illinois, and California to low-tax states like Texas and Florida. …In time, if taxpayers tend to migrate from high-tax states to low-tax states, and if people receiving government benefits tend to stay in place or migrate from lower-benefit states to higher-benefit states, then over time lower-tax states will tend to accumulate more people with high earnings, while higher-benefit states will tend to accumulate more people who live on the dole. …if high-benefits states are also high-tax states (as is often the case) since then states with high benefits will accumulate more people who draw on them, while shedding the taxpayers they need to support them. The problem is that the result isn’t stable: High-tax, high-benefit states will eventually go bankrupt because they won’t retain enough taxpayers to support their welfare spending.

He then makes a very interesting observation about the risk that people who leave states such as New York, Illinois, California, and New Jersey may bring their bad voting habits to their new states.

…migrants from high tax states might bring their political attitudes with them, moving to new, low-tax states for the economic opportunity but then supporting the same policies that ruined the states they left. This seems quite plausible, alas, and I’ve heard Coloradans lament that the flow of Californians to their state involved a lot of people doing just that. …If I were one of those conservative billionaires…I might try spending some of the money on some…sort of welcome wagon for blue state migrants to red states. Something that would explain to them why the place they’re moving to is doing better than the place they left, and suggesting that they might not want to vote for the same policies that are driving their old home states into bankruptcy.

Glenn makes a very good point.

As part of my work on defending TABOR in Colorado, I often run into people who fret that the state has moved in the wrong direction because of migration from left-leaning states.

Though Chuck DeVore shared some data on how migrants to Texas are more conservative than people born in the state.

I will never stop defending the right of labor and capital to escape high-tax regimes. I especially enjoy the hysterical reactions of folks on the left, who think that my support of fiscal sovereignty means that I’m “trading with the enemy,” being disloyal to my government, or that I should be tossed in jail.

I’ve argued, for instance, good tax policy isn’t a panacea if there are many other policies that expand the burden of government. Likewise, bad fiscal policy isn’t a death knell if there’s a pro-market approach on issues such as trade, regulation, and monetary policy.

Which was the point I made, in this short excerpt from a recent interview, when asked about the Trump tax cut.

Similarly, the economy didn’t get strong growth during the Bush years because his one good policy (the 2003 tax cut) was more than offset by many bad policies.

The same is true for policy in other nations. That’s why I always check the Fraser Institute’s Economic Freedom of the World before writing about another country. I want a dispassionate source of data that covers all the major types of public policy.

And that generates counter-intuitive results, at least for people who focus on fiscal policy.

I’ve crunched the data to show that nations such as Denmark and the Netherlands remain relatively rich because they have pro-market policies that offset onerous fiscal burdens.

First, don’t pay excessive attention to partisan affiliations. Yes, sometimes a Republican such as Reagan reduces the burden of government, but plenty of GOPers (Hoover, the first Bush, Nixon) impose lots of statism.

The same is true in other nations. Many of the pro-market reforms in Australia and New Zealand were initiated by Labour governments.

Second, let’s close by explaining why this matters. When people fixate on partisan labels rather than policy changes, it can lead them to very erroneous conclusions.

For instance, even though the Great Depression was mostly the result of government intervention, many people think it was caused by capitalism simply because a Republican president was in office when it started.

Similarly, even though the recent financial crisis was caused by government intervention, many people want to blame free markets merely because a Republican president was in office when it started.

P.S. In the interview, I said monetary policy might deserve some of the blame if the economy turns south. I want to stress, however, that I’m not blaming the Fed for trying to “normalize” today. Instead, the problem is all the easy-money policyearlier this decade.